Ukraine’s richest are among the world’s movers and shakers who rely heavily on Switzerland’s banks, notorious for their strict confidentiality, to the chagrin of tax authorities in many nations.
Ukraine’s richest are among the world’s movers and shakers who rely heavily on Switzerland’s banks, notorious for their strict confidentiality, to the chagrin of tax authorities in many nations.
However, while U.S. authorities are cracking down on Swiss tax-evasion schemes, not many in Ukraine want to even talk about the issue.
Swiss national Leslie Hawrylyshyn, a founding owner of Euroventures Ukraine, is one of the exceptions. “Out of the 100 richest Ukrainians, I believe 90 percent of them have bank accounts in Switzerland,” Hawrylyshyn said.
Hawrylyshyn knows a bit about Switzerland. His 84 year-old father, Bohdan Hawrylyshyn, emigrated to Canada and then Switzerland from Ukraine after World War II.
He established himself as a well-known economist and successful businessman. Hawrylyshyn’s Euroventures Ukraine has pumped tens of millions of dollars into a broad portfolio of businesses in Ukraine.
Switzerland gained fame for accepting suitcases of cash – no questions asked – and for accepting money from some of the world’s biggest criminals, including Adolf Hitler.
It eventually came to light that many dictators, such as Robert Mugabe from Zimbabwe, Jean-Claude “Baby Doc” Duvalier from Haiti and Imelda and Ferdinand Marcos from the Philippines kept huge fortunes in Swiss bank accounts.
Recent revelations involve the assets of former Egyptian President Hosni Mubarak and Libyan strongman Muammar Gaddafi. Those accounts were frozen amid domestic uprisings.
Switzerland, by some accounts, is involved in one way or another with up to a third of world’s offshore accounts. Like Cyprus, the British Virgin Islands and Belize, its banks and company registration rules are used in murky transactions.
Often, the end result is to deprive home nations of taxes and to mask the identities of the account holders.
Leslie Hawrylyshyn
“I’m not sure how so many multimillionaires made so much money in less than 15 years…. but they are now proper enough to deal with Swiss banks,” Hawrylyshyn said.
However, all that is changing and the veil of secrecy is slowing being lifted.
Since 2000, people who can’t prove the origin of their money have had a hard time opening Swiss bank accounts. But the steps taken are rarely an impediment for Ukrainians nowadays, according to Hawrylyshyn. “Now, of course, their money looks more legal – and could meet Swiss standards,” he added.
Bowing to international pressure, the Swiss government eased banking secrecy in March 2009. The decision was a big break from a tradition set 75 years ago.
“I believe that there is more banking secrecy in Austria now than in Switzerland,” Hawrylyshyn said.
By contrast, Ukraine’s leadership does not seem to be curtailing abuse of offshore havens by influential politicians and business oligarchs.
The last attempt took place in July 2008, when Ukraine’s parliament fell three votes short of legislation to cancel a double taxation avoidance treaty with Cyprus.
The island has a corporate tax rate of 4.25 percent, far less than Ukraine’s corporate profit tax.
As a result, Ukraine’s state budget has been starved of billions of dollars in tax revenue since national independence in 1991.
The need to move money remains high. While some say the nation’s shadow economy is gradually coming into the light, others say it still hovers around
50 percent of Ukraine’s economic output.
So Switzerland remains in demand – for legitimate and other reasons.
Siberian-born Vladimir Oster, managing director of Switzerland-based Tag Group, comes to Ukraine to explain at investment conferences how a Swiss company can be registered and operate.
“Trading companies and financial consultancies are the most interested. They benefit from stable political and economic systems, low taxes for the foreign entities as well as the ability to plan – which is what they can’t get in Ukraine,” Oster said.
For instance, many grain traders in Ukraine have legal entities registered in Switzerland, according to a source at the Swiss Embassy in Kyiv.
“One can make a deal with a Swiss canton [state], say buying property, and then the income tax could go down to as much as 1 percent,” said Sacha Pictet, a descendent of the famous banking family that has been involved in Pictet & Cie private bank since 1830.
Sacha Pictet came to Ukraine in 2008 to oversee The Ukraine Opportunity Trust, an investment arm of Fabien Pictet and Partners, a fund that specializes in emerging markets.
What about secrecy? Swiss authorities now cooperate with criminal and financial fraud investigations, although it remains difficult for Ukrainians to learn who from their elite is hiding or moving their money through Switzerland.
“Those who keep money [in Switzerland] should be a big fish. The minimum deposit should be at least $250,000, but they won’t take you seriously unless you put $500,000 in the bank,” Pictet sad.
Sacha Pictet
To open a company, registered capital should be at least $100,000.
While huge sums of Ukrainian money are believed to be moving through Switzerland each year, Ukraine has received only a tiny share back. Swiss investment in Ukraine is estimated to amount to less than one billion Swiss francs.
While top officials in government, such as Prime Minister Mykola Azarov, regularly urge Ukrainians to start paying taxes and stop using offshore schemes, the reality is that top government officials and the nation’s richest businesspeople are widely suspected of benefitting the most from international tax schemes.
Kyiv Post staff writer Katya Grushenko can be reached at [email protected].
